Mothercare is reportedly considering placing its British operations in administration, putting 2,500 jobs at risk.
The company is said to have put administrators on standby and is finalising a restructuring plan.
This could mean administrators could be called in to its domestic division as soon as this week, according to Sky News.
Any such move would not directly affect its publicly quoted parent company, which is in deep talks with lenders over a refinancing deal to secure its future trading.
Any restructuring or insolvency of the firm could plunge thousands of employee’s jobs into doubt.
All the company’s 2,500 workers in the UK are facing redundancy if no buyer can be found through the administration process.
It could lead to shop closures and a push for a new buyer for the UK arm of the business.
Mothercare’s British operations, Mothercare UK Limited, is a small part of its overall group sales.
In recent times, Mothercare has transformed itself into an international franchising group and trades from 1,000 stores in about 50 countries.
The baby equipment retailer now leans heavily on its international franchising business abroad.
Restructuring experts from accountancy giant KPMG were brought in last week.
Under a controversial company voluntary arrangement (CVA), Mothercare shut 55 stores last year and has been trying to sell its UK side of the company.
The company is considering closing more stores or asking landlords for rent cuts, but a sale is believed to be preferred option.
In May it was announced in a delayed set of annual results that Mothercare’s losses grew to £87.3m in the last financial year.
The struggling retailer pushed back its report because of the ‘complexity’ of its finances, sending shares down 5.2 per cent.
Sales fell 7.9 per cent to £1.07bn from £1.16bn the previous year, the report stated.
Mothercare was founded by Selim Zilkha and Sir James Goldsmith, opening its first store in the UK in 1961 in Surrey and now makes up just 79 standalone outlets.